The public is often shocked to learn that for-profit charters use federal money to skim funds at taxpayer expense. Under the strictest interpretation of federal law, for-profit charters cannot be subsidized by the federal government. Title 20 of the Elementary and Secondary Education Act requires K-12 schools to be non-profit organizations to receive federal funding. However, smart for-profit operators are creating workarounds using non-profit facades to evade the law.
Last year, the Network for Public Education deepened the for-profit operations of charter schools. The patterns we discovered ranged from elaborate to simple, depending on the creativity of the operator. Worse yet, we’ve seen how for-profit organizations rob children of their pockets.
We have uncovered scandalous examples of self-operations, such as Reginald Barr, who, along with his wife and daughter, owns the management, staff, and real estate companies outsourcing their Arizona-based AmeriSchools. They also sit on the nonprofit board of directors that governs the charters, ensuring that any rent or charges they want are approved and transferred directly to their accounts.
In North Carolina, Donnie McQueen is the executive director of the for-profit organization that runs Torchlight Academy, of which he is the executive director and his wife is the director. He is also president of the real estate company that owns the building rented to the school. Almost every penny that comes in is donated by the nonprofit organization to the profit organization it owns.
Marcus May’s for-profit Newpoint Education Partners operated 15 charter schools. May persuaded parents and community members, mostly naive of school governance, to create charter schools dependent on Newpoint. His sales companies overcharged schools for furniture, computers and other items. He took bribes and brokerage fees for leases and inflated listing numbers for more income. May is now being held in Florida, appealing his 20-year sentence for racketeering and organized fraud.
These scammers often use “sweep” contracts to extract every penny from their taxpayer-funded charter schools. Examples of scans include contracts between the Ohio Distance Electronic Learning Academy and Accell Online Ohio, LLC; Northeast Raleigh Charter Academy and Torchlight Academy schools; and Ohio Virtual Academy and K12 Virtual Schools.
Sweep Contracts are used by one of the largest for-profit chains, National Heritage Academies (NHA), which uses its control to make money from real estate, whether as a broker or as an owner. . For example, the NHA leased a building from the Diocese of New York for $ 264,000 and then sublet it to its Brooklyn Dreams Charter School for $ 2.76 million. NHA owner JC Huizenga sells 69 chartered buildings to a new non-profit organization run by his personal lawyer. The operation is funded by nearly $ 1 billion in municipal bonds. Even after cashing in on the sale of the school, his for-profit organization will control them, raking in the profits from day-to-day operations and building maintenance.
However, the cost reduction and service reduction strategies used by for-profit organizations to maximize their results are of most concern, such as the following:
– Bypass state rules for qualified educators by designating their uncertified and inexperienced teachers as “permanent substitutes”.
– Limiting the number of students with special needs allowed to attend, violating open enrollment laws.
—Overcrowded classrooms, especially online. An online charter operator had a student-teacher ratio of 275 to -1.11.
—Institute policies and practices aimed at discriminating against or excluding students whose education is expensive.
Of course, charter schools should be free to use for-profit companies to provide books, transportation, etc. But when for-profit companies run the school, internal transactions, secrecy, and real estate empires quickly take precedence over the well-being of children. Fortunately, Congress is on the verge of closing a major loophole exploited by these for-profit charter operators. It is hoped that the Senate will pass Section 314 of the 2022 House Labor, HHS and Education Appropriations Bill and help ensure that our tax dollars stay in the classroom with the students to which they belong.
Obviously, some parents are satisfied with the services offered by these schools. I’m not saying they should be closed. But if our federal dollars are used to support them, then the spirit of the law, not just the letter, must be respected.
Charter schools and public schools should be free to use for-profit businesses to provide books, transportation, etc. But when for-profit companies are in the spotlight, internal transactions, secrecy, and real estate empires quickly take precedence over child welfare. It is time for Congress to close the loophole and put children before profits once and for all.
Carol Burris is the Executive Director of the Network for Public Education. She wrote this for InsideSources.com.